1/4 cup (1/2 stick) butter
3 tablespoons all-purpose flour
Salt and pepper to taste
Pinch of freshly grated nutmeg (optional)
2 cups milk
4 cups thinly sliced potatoes (about 4 medium potatoes)
1 small onion, thinly sliced and separated into rings
1/2 cup shredded sharp cheddar cheese
Preheat oven to 350° F. Melt the butter in a medium saucepan over medium heat. Add the four and whisk until well blended, about 2 minutes. Gradually whisk in milk. Cook, whisking or stirring constantly, until the mixture starts to boil and thicken. Stir in the salt, pepper and nutmeg. Remove from heat.
Generously butter or spray a 1-1/2 quart baking dish. Layer one-half of the potatoes, then one-half of the onion and one-half of the sauce in the dish. Repeat the layers. Cover tightly and bake for 1 hour. Uncover; bake an additional 15 minutes or until potatoes are tender. Sprinkle with cheese and bake until cheese is melted, about 5 minutes. Serve hot.